The Road To New England -- An Update -- Forbes -- June 26, 2016; RBN Energy Weighs In

Updates

June 27, 2016: one day after the Forbes article below was posted, we have an update from RBN Energy saying the same thing -- how more northeast propane and butane storage might help. The article is archived.

The U.S. Northeast now produces all the propane and butane it needs on an annual basis (Energy Information Administration - EIA PADD 1 plus Utica production from Ohio), but the seasonal nature of the region’s demand—and a dearth of in-region storage—means a lot of the natural gas liquid (NGL) production needs to be railed to storage facilities elsewhere during the warmer months, then be moved back in to meet wintertime needs. This propane/butane back-and-forth raises costs and reduces producer netbacks. Surely there is a better way. Today, we continue our review of NGL storage (or the lack thereof) in the Northeast, and how proposed NGL storage facilities in the region might help.

NGL production in the wet Marcellus and Utica shale plays has been rising fast. According to EIA, in 2012, production of NGLs in Petroleum Administration for Defense District (PADD) 1 from natural gas processing plants (the region includes Pennsylvania and West Virginia, but not Ohio) averaged less than 50 Mb/d; but by March 2016, it had risen to 321 Mb/d, including 115 Mb/d of ethane, 118 Mb/d of propane, 37 Mb/d of normal butane, 17 Mb/d of isobutane, and 34 Mb/d of pentanes+ (natural gasoline).

Ohio (part of PADD 2) only adds to the totals. The boom in Northeast NGL production has posed a real challenge to producers and midstream companies as demand for propane and butane swing sharply between summer and winter with heating demand for propane and motor gasoline blending demand for normal butane—and there is only a limited amount of NGL storage capacity in the region.

We also described the plan by Denver, CO-based Mountaineer NGL Storage to develop a facility of the same name at a riverfront site in Monroe County, OH (near Clarington, and just across the river from the base of West Virginia’s panhandle). Mountaineer’s proposed NGL storage facility would consist of several bedded salt deposit caverns that would be capable of storing a total of up to 2 MMbbl of ethane, propane, butane and mixed NGLs (also known as Y-grade). Mountaineer is planning an early 2017 construction start and an early 2018 commercial operation date.

The Northeast would benefit from additional in-region storage capacity for ethane—the lightest and, in many ways, the most challenging NGL to deal with. Ethane storage capacity near NGL production areas in western Pennsylvania, northern West Virginia and eastern Ohio, we said, would help deal with ethane market balancing issues not addressed by MarkWest’s unique ethane-management system, and would provide “safety stock” for any ethylene plant (steam cracker) that may be developed nearby.

Six days after that blog was posted, Shell Chemical announced its final investment decision (FID) to build a Beaver County, PA cracker that is being designed to convert 90 Mb/d of ethane into ethylene and other products, as well as three polyethylene units that will convert ethylene into about 1.6 million tons of polyethylene a year .  Shell’s press release indicated that construction will not begin for another 18 months, so the cracker will not be online until sometime in the early 2020s.

While ethane storage capacity in the heart of the Marcellus/Utica region would surely help, there are other alternatives to balance ethane supply and demand.  Ethane production surplus of local cracker needs can be either “rejected” into natural gas or transported out of the region on the Mariner East (to the Marcus Hook, PA export terminal), Mariner West (to the Sarnia, ON petrochemicals complex), or the Appalachian-to-Texas Express (ATEX) Pipeline to Mont Belvieu, TX.  So it is likely that the highest and best use of additional NGL storage in the region would be for two other NGLs – propane and butane. 

These NGL products are widely used within the Northeast, but mostly during the colder months of the year. We need to note up-front that while NGL storage capacity that serves the Marcellus/Utica region is quite small relative to the Gulf Coast (Mont Belvieu, TX and other Gulf Coast storage has more than ten times the capacity of storage serving the Marcellus/Utica), there is at least some. For example, MarkWest, a leading natural gas processor and NGL producer in the region, has access to storage for Y-grade and non-ethane purity products (propane, butanes and natural gasoline).

According to its website, MarkWest has 190 Mbbls of NGL storage at Houston, PA; 270 Mbbl at Hopedale, PA; and 40 Mbbl at Keystone, PA. It also has access to 1.2 MMbbl of shared third-party propane storage that is owned by Enterprise Products Partners (part of Enterprise’s Products Pipeline System that runs from the Gulf Coast to the Northeast, commonly known by its historical name, Teppco) and located in Watkins Glen, NY. Crestwood Equity Partners has 1.7 MMbbl of NGL salt-cavern storage capacity at its Bath facility in Steuben County, NY.

Original Post

 

As usual, a Forbes contributor does a great job updating the energy situation in New England.

I don't know if there's anything new in this article that we haven't talked about before, but it's in one place, now, and a great update. The article begins:

Despite not producing any itself, New England has rapidly surged its reliance on natural gas. ISO New England now gets about 50% of its power from gas, versus 10-15% a decade ago. From 2014-2015 alone, gas increased its share of New England’s power generation from 43% to 49%. Nearly 30 gas plants have been built in the region since 2000.

And largely based on the goal to reduce GHG emissions, plans for more energy efficiency, low levels of wind and solar generation, the shutdown/retirement of coal, oil, and nuclear plants, New England’s gas demand therefore will obviously continue to grow. ISO New England has “assessed the fleet of power plants in the six states and found that nearly a third of the grid’s generating capacity will have closed or be at risk of closure by 2020.”  [2020 is about four years from now; Hillary will still be president. First term.]

New England is the country’s most oil-reliant region, used for power generation and heating. Home heating takes priority in winter, and new and highly efficient electric plants don’t get reliable access to gas.  That’s why over 80% of the coal and oil used for power last year in New England occurred during the first quarter.

The claim that more renewables and more energy efficiency negate the need for more gas and more gas pipelines is simply not true. Take Massachusetts, which consistently ranks as the “most energy efficient state” and has still doubled its reliance on gas power to 50% since 2000. Massachusetts has nearly 20 times more gas power capacity than wind and solar capacity combined.

A big "thank you" to Don for sending this my way.